Music sales down 5pc in 2013 through lack of hits and effect of streaming services

Recorded music sales in Australia are set to fall this year, dashing hopes of a sustained comeback by the sector hit hardest by online piracy, The Australian Financial Review can reveal ahead of ARIA week next week.

Wholesale sales rose 4 per cent last year to $398 million, only the second increase in a decade, as digital sales growth offset the decline in CD sales, backed by huge-selling albums from Adele, Taylor Swift and Gotye.

But it is understood sales are down 5 per cent so far this year due to a ­cyclical dearth of hits and the canni­balisation of legal download sales by fast-growing, cheap all-you-can-eat streaming services. These services, such as
Spotify
and
Rdio
(which operates in Australia as a joint venture with Lachlan Murdoch’s DMG) offer access to vast libraries of music for about $10 a month or free with advertising.

Lady Gaga performs in New York this month, and music executives hope her new album can lift Christmas sales.
Photo: Getty

A spokesman for the Australian Recording Industry Association declined to comment and said official figures for 2013 sales will be released early in the new year.

Last year’s rise, the first since 2009, was cause for celebration for record executives after years of dire predictions that the internet would kill the business because of rampant piracy and the unbundling of albums into ­single track downloads.

Some senior executives remain bullish and describe 2013 as a “year of adjustment" as streaming services – which also include Pandora, Nine Entertainment’s Songl and Telstra’s MOG – go mass market.

“The industry is not worried," one said. “What we have seen from countries like Norway and Sweden, where streaming has really bedded in, is that after the first 18 months you get growth again. At first there a lot of people are on free three-month trials or free services with advertising. People start paying."

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Kate Vale, managing director, Australia and New Zealand for Spotify, which launched here 18 months ago, said many of Spotify’s users were former file-sharers who had been persuaded to start paying for music again.

“As a result, the bulk of the money we’re generating for the industry is all additional revenue, and will continue to increase as we move more and more people away from piracy," she said.

But other senior executives say streaming is eroding downloads and bringing in less revenue, with many artists complaining of low royalties and some – such as Radiohead’s Thom Yorke – boycotting Spotify altogether.

“When streaming services first started people would discover way more music than ever have before and might buy albums they liked on iTunes," one said. “But as people gradually get used to idea of access to music rather than ownership they are less insistent on owning that music."

Record executives are hoping for a Christmas fightback with albums yet to be released from One Direction and albums just out by Lady Gaga, Katy Perry and The Killers.

However, no albums thus far this year have come close to replicating the success of Adele’s 21, which has now gone 14 times platinum.

The fickle nature of the market is underlined by the fact that 31 albums have held the No. 1 slot so far this year, up from 23 last year and the highest number since ARIA’s inception, it is understood.

Chugg Entertainment Founder
Michael Chugg
, told the Financial Review: “It’s cyclical. We’ve inherited a lot of this from England. Now you have things rushing up and down the charts, it’s about sustaining something. It’s a very competitive area, there are so many artists competing.

“But I’m not one of these doom­sayers. As much as streaming can affect sales, it can give artists exposure to other sources of income, such as touring, which are just as important."